SYDNEY — Employers throughout Asia Pacific continue to keep a tight rein on the purse strings in 2009, as salary increases remain at low levels, according to the Asia Pacific Salary Increase Survey conducted by Hewitt Associates (NYSE:HEW), a global human resources consulting and outsourcing firm. This trend looks likely to continue in 2010 as base salaries are projected to rise only slightly in most Asia Pacific markets.

This year, no Asian market experienced double digit average salary increases. India had the highest pay rises in the region with an average overall salary increase of 6.3 percent. Indonesia ranks second, with an average overall salary increase of 6 percent, followed by China (4.5 percent) and the Philippines (4.3 percent).

At the other end of the scale, Singapore and Hong Kong saw lower salary increases ranging from 1.8 percent to 1.4 percent respectively, just ahead of Japan at 1.2 percent, the lowest in the region. These are also the markets which are experiencing the most widespread salary freezes in the region, with over 60 percent of responding companies keeping wages constant, compared with only 26.1 percent in India and 30.8 percent in China.

Jairus Ashworth, Australia and New Zealand Leader of Hewitt's Reward practice, said "The recent uptick in the economy has not yet made a significant impact on pay increases. We expect that companies will continue to fight for better margins through effective cost management, including management of pay.

Although employees still received reasonable pay increases, they were lower than previous years. In the next few years, emerging growth markets in Asia as compared with mature markets, are expected to provide slightly higher salary increases, as they continue to struggle with the hiring and retention of top quality talent. China and India's role as the future growth engines of the global economy will continue to add fuel to the ongoing war for quality talent in these two markets. Therefore, it is not surprising to see the overall increases experienced by these markets."

Hewitt's data show that most Asia Pacific companies continue to experience double-digit voluntary turnover rates, while Singapore, Korea and Thailand are on high single digits from 8.8 percent to 9.3 percent. The markets reporting the highest turnover rates are India (13.8 percent), Australia (11 percent), New Zealand and China (10.3 percent). Ashworth said, "While many would believe the economic uncertainty should help ease the pain of high employee voluntary turnover, the Hewitt 2009/2010 Annual Asia Pacific Salary Increase Survey reveals that this is in fact not the case."

Hewitt's survey revealed that 'Better External Opportunity' is consistently cited as the top reason for employees voluntarily leaving their organisations across all markets. This means companies continue to search for talented people even under tough economic conditions.

"An organisation's ability to retain talent is an issue facing most companies. This challenges organisations to be more innovative in retaining the top people with a tighter budget. Companies need to focus on pursuing different talent management strategies suitable for their own workforces. Most notably, 'Variable Pay Program' is the most popular incentive adopted by companies", explained Ashworth.

The majority of organisations surveyed (over 75 percent) are not reducing year-end Variable Payout. Individual Performance Awards are the most prevalent variable pay program in the region with nearly 70 percent of the responding organisations using it as an incentive.

"Companies realise that they cannot afford to lose talent. They know 'high performers' will help them lead the organisation out of the storm. Even those companies experiencing unprecedented levels of uncertainty and cost reduction pressures, are trying to reward and retain their best talent with special incentives." Ashworth added.

The challenging talent market also compelled companies to reward talent differently. Top performers receive 50 percent higher rewards than average performers.

"It is a good sign that many companies continue to invest in and reward top talent. Even though the economic crisis has led to smaller salary budgets, organisations have an opportunity to enhance rewards differentiation based on performance," said Ashworth. "Meanwhile, it is essential that companies design these plans in a way that motivates employees in the longer term, by aligning day to day work with the company's overall goals and its sustaining values. After all, people want to join and stay with a company where they are valued and where the organisation consistently lives its values in good times or bad."

Market highlights: Australia

• Information was collected from 144 organisations
• The 2009 average increase for all employees ranged from 1.4 percent for executives to 2.5 percent for the manual workforce. It should be noted the Australian Bureau of Statistics has measured inflation of 2.5 percent. This has effectively reduced many employees' salaries with the exception of the manual workforce who have maintained the same level of "real" wages.
• The overall salary increases for all participants averaged 2.1 percent in 2009. The market outlook is good for 2010 with the average salary increase expected to be 3.4 percent.
• 50 percent of participating organisations reported a salary freeze for 2009 and 14.6 percent of the participants indicated they expect a freeze in 2010.
• Majority of the responding organisations (58.5 percent) are planning to hire strategically as a measure to control workforce size.
• 92.9 percent of respondent organisations have variable pay programs. Individual Performance Awards are the most prevalent.

2010 Outlook
For 2010, employers appear to have much more confidence in the economy. Overall, projections for salary increase for 2010 have improved compared to 2009. Hewitt's survey reveals that employees in the fastest growing markets may see higher salary increases in 2010 than others. These markets include India (9.2 percent) and China (6.7 percent). Fewer companies in these markets project pay freezes in 2010, just 6 percent in India and 8.3 percent in China. The markets projected to have the lowest salary increases next year are Japan (2.1 percent, the lowest in the region), Singapore (2.6 percent), Hong Kong (2.9 percent) and Australia (3.4 percent). They are also the markets where more organisations expect salary freezes, ranging from 12.8 percent to 14.6 percent. These percentages, however, are significantly lower than in 2009.

What will this mean for the employers and employees?

"Asian companies are likely to continue to face a very dynamic business environment in the coming year. Organisations who know how to align their human capital strategy to their overall business strategy and use smart and innovative rewards and recognition to drive business performance, will be the winners in the long term." suggests Ashworth.

About the Hewitt Asia Pacific Salary Increase Survey 2009-2010
Hewitt surveyed 2346 foreign, locally-owned and joint-venture companies between July and August 2009, in 21 markets – Australia, Bahrain, China, Egypt, Hong Kong, India, Indonesia, Japan, Korea, Kuwait, Macau, Malaysia, New Zealand, the Philippines, Qatar, Saudi Arabia, Singapore, Sri Lanka, Taiwan, Thailand and United Arab Emirates. The study measures actual and projected salary increases, and compensation practices for six job categories: Top Executive, Senior Management, Middle Management, Junior Manager/Supervisor/Professional, General Staff and Manual Workforce.

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About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organisations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt works with companies to design, implement, communicate, and administer a wide range of human resources, retirement, investment management, compensation, and talent management strategies. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates  who are helping make the world a better place to work. For more information, please visit www.hewittasia.com.